On 13 April 2010, the Appeals Court
(College van Beroep voor het Bedrijfsleven) in Rotterdam annulled the Dutch
regulatory authority OPTA's decision on Market 6 (wholesale terminating
segments of leased lines) of 19 December 2008.

A key characteristic of that OPTA decision was that it distinguished the market
for leased lines up to 20 Mbit/s (‘low capacity') from the market for leased
lines above 20 Mbit/s (‘high capacity') at the retail level and at the
wholesale level (with regulation adopted only at the wholesale level).

The annulment (following appeals filed by many operators, on various grounds and defending a variety of positions) relates specifically to OPTA's market definition/market segmentation, and is remarkable, as it relies to a great
extent on technical detail, and addresses questions surrounding copper and fibre as supply-side and demand-side substitutes.

In particular, the Court's judgment concludes that, in the specific context of leased lines, OPTA should have found that
that neither pair-bonded copper nor VDSL2 constitute valid substitutes for fibre.

The Court's judgment was only recently
published in its entirety and this now allows us to provide an analysis of the
precise reasoning relied upon by the Court.

1. Supply-side: technical analysis -
pair-bonding and VDSL2

First of all, the Court considers that
OPTA's assessment of the development of certain technical solutions, such as
pair-bonding of copper lines, was incorrect. It finds that there appear to be
insufficient resources (insufficient number of copper lines serving the
premises) in many areas where businesses are located. Pair-bonding is therefore
considered by the Court not to be a feasible alternative to high-capacity fibre in these areas. Even if sufficient copper lines are
physically present, the Court considers that OPTA has not sufficiently analysed whether they are
available to be pair-bonded into high capacity (20 Mbit/s or more) leased

Secondly, the Court considers that OPTA has
not sufficiently assessed the length of the copper loops, and the impact
thereof on the possibility to achieve high speeds by utilising pair-bonding. The
Court states that, in locations where the copper loops are too long, bonded
loops will not achieve performance matching a >20 Mbit/s fibre connection.

Thirdly, OPTA has, according to the Court, erroneously
assessed the potential of VDSL2, and the Court adds that the asymmetrical
nature of VDSL2 makes it only suitable for residential markets but not for
business markets (which, according to the Court, require symmetrical connections). Distance from the MDF also plays a role, and hence
the suitability of VDSL2 as a substitute for high capacity leased lines should
have been more critically analysed. The fact that VDSL2 was not substantially
rolled out at the time of the OPTA decision also contributes to the doubts expressed
by the Court.

2. Supply-side: proportion of copper/fibre in the >20 Mbit/s segment

The Court's judgment, in the specific context of
leased lines, is that OPTA's conclusion that pair-bonded copper can generate
disciplinary price pressure on fibre
is flawed.

OPTA had not researched the proportion of
copper and fibre access used. According
to the Court, such research was necessary to ascertain in reality whether copper really
exercises sufficient disciplinary price pressure on high capacity fibre, and for OPTA to conclude that they can be placed in the same

The Court adds that re-migration from fibre to copper is not a plausible option, as this
would annul the investments already made in fibre.

3. Demand substitution

The Court finds that the data on which OPTA
has based itself to research demand substitution is insufficient to come to a
valid conclusion, and that OPTA has therefore incorrectly assumed that the data
(provided by Dialogic in 2008 in the form of a report) was sufficient to gain
insight into this matter. OPTA's conclusion with regard to demand
substitutability is therefore ruled invalid by the Court.

The Court also concludes that, in stating
that a price comparison of leased lines offers is impossible due to the many
different packages and bundles, OPTA has not been able to put forward a solid basis
for its statement that there is a price jump between 2 Mbit/s and 34 Mbit/s,
which in turn would lead to an absence of demand substitution between leased
lines with a capacity up to 20 Mbit/s and leased lines with a capacity above 20

The 3 categories of critique outlined above
lead the Court to conclude that OPTA has not fulfilled its obligations as a
national regulatory authority to collect solid information in order to
adequately justify its decision.

The Court therefore concludes that a correct
delimitation and definition of low capacity and high capacity leased lines has
not been established by OPTA, and that the market analysis decision must be annulled.

OPTA is given 6 months to issue a new
decision; in the meantime, the annulled decision stands.

The full text of the CBB judgment (in
Dutch only) can be accessed by clicking here.

For a discussion of this case, and its possible implications for other markets, please
contact Alexa Veller.